Question

Leaper Corporation uses an activity-based costing system with the following three activity cost pools: Activity Cost Pool Total Activity Fabrication 35,000 machine-hours Order processing 250 orders Other Not applicable The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs. The company has provided the following data concerning its costs: Wages and salaries $ 380,000 Depreciation 150,000 Occupancy 170,000 Total $ 700,000 The distribution of resource consumption across activity cost pools is given below: Activity Cost Pools Fabrication Order Processing Other Total Wages and salaries 35% 30% 35% 100% Depreciation 15% 45% 40% 100% Occupancy 35% 30% 35% 100% The activity rate for the Order Processing activity cost pool is closest to:

Answer 1

Answer:

Order processing= $930 per order

Explanation:

First, we need to calculate the estimated costs for order processing:

Order processing cost= (380,000*0.3) + (150,000*0.45) + (170,000*0.3)

Order processing cost=$232,500

Now, we can calculate the activity rate:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Order processing= 232,500 / 250

Order processing= $930 per order